November 7, 2009
New York's bottle deposit creates a multi-million dollar business
Chris Henneberry unloads cans into a sorter at the Tomra NY Recycling LLC plant in DeWitt. Tomra is a subsidiary of Tomra Systems ASA, a Norwegian company that makes millions recycling bottle and cans. The company processes 1.2 billion bottles and cans every year.
DeWitt, NY -- The smell is funky and sweet, old beer and soda fermenting together in the pores of the cement floor. The high-pitched hum of giant blowers pushing plastic bottles into a shredder is deafening.
Every working day, 865,000 cans and bottles are hauled out of tractor trailers into this Tomra NY Recycling LLC plant in a DeWitt industrial park, on Falso Drive. Nearly every can or bottle returned for a nickel in Central New York — some 200 million a year — ends up on this floor to be crushed or chewed up into scrap.
Tomra plants handle almost all of the returnables Upstate and in some parts of New York City. They truck, crush and package 1.2 billion — that’s billion — bottles and cans every year. Of those, 250 million are plastic.
Starting Sunday, the number of plastic bottles will double, as redemption centers and grocery stores begin to see water bottles come back. The state started requiring a 5-cent deposit on water bottles Oct. 31 but gave everyone a week to comply.
Grocery stores and drink distributors complained, and some even sued, to keep the nickel off water bottles. In the end, the state won. And so did recycling giants like Tomra.
They have built a multi-national, million-dollar business a nickel at a time. The parent company of Tomra NY Recycling LLC — Tomra Systems ASA, a Norwegian company — pulled in $16.9 million in the third quarter of this year in the eastern U.S. and Canada. The company also has operations in Europe.
It has plants like the one in DeWitt in the Buffalo, Rochester and Albany areas. They grind plastic bottles into tiny chips and turn cans into aluminum hay bales.
And it owns 1,000 of those reverse vending machines across Upstate that take your can or bottle, spin it and crush it. Tomra also takes glass bottles, but in this area those are repackaged and sent back to the distributors.
People who redeem cans and bottles at Up to 8 Cents Bottle-Can Return Center, on Erie Boulevard East, can increase their payout depending on how they toss three darts at a dart board.
In New York, the burden of the bottle-return system falls heaviest on drink distributors. They are responsible for picking up the empty cans and bottles from redemption centers and grocery stores. But most of them hire third-party companies, like Tomra, to do that for them and to keep track of what got returned where.
New York’s bottle deposit law is a nickel shell game. The distributors sell the soda, beer and water to stores. The stores pay a nickel for every can and bottle. The distributors put those nickels into an account. When you buy your soda, you pay a nickel for every bottle. When you take your bottles back, you get your nickels back.
At that point, the stores are out the nickels. That’s where Tomra comes in. They send out their trucks to pick up giant plastic bags full of bottles and cans. And they settle the accounts on behalf of all the distributors. The stores and redemption centers used to get a nickel back for each can and 2 pennies for their trouble. Now, the trouble money, paid by distributors, is up to 3.5 cents.
If people didn’t return their bottles and cans, distributors kept money leftover, the unclaimed deposits. They said they used that to defray the cost of running recycling programs and paying for the services of companies like Tomra.
Under the new law, they keep just 20 percent of those unclaimed nickels. The rest, 80 percent, must go to the state. The state expects that will raise more than $100 million.
The bottle bill accounting has always been a little imprecise. The nickel for a bottle bought in Buffalo could come out of a distributor’s pocket in Syracuse, if that’s where it’s returned. No one really cared before, though, because they were only nickels, and distributors pocketed millions in unclaimed nickels.
With a big chunk of those extra nickels going to the state now, and more distributors getting in the mix, people will be paying closer attention.
Walt Powers, a manager of distributor relations who works out of Tomra’s DeWitt plant, said his people will be making sure that old non-deposit water bottles don’t get stuffed in with the deposit bottles.
Then there’s what you might call the “Seinfeld Problem.”
Remember the episode where Kramer and Newman loaded a mail truck with cans and bottles and drove them to Michigan, where the deposit is 10 cents instead of 5? What’s to keep people from redeeming in New York water bottles sold deposit-free in other states?
Nothing, really. “It could happen,” said Michael Rosen, who speaks for the Food Industry Alliance of New York State. His group represents 21,000 grocery stores, which fought for more time to get the bill up and running. “We’re going to see some people buying out of state and redeeming it here,” Rosen said.
He lives near the Massachusetts border and expects that some people might head over the border to buy their water and their clothing, which is not taxed.
New York attempted to put a provision in the law that would make this impossible, requiring a code specific to bottles sold in New York. But that was struck down by a federal judge after some water companies sued. It could be a burden for companies who sell the same bottles in several states.
Powers, of Tomra, lost his good-natured chuckle when talk of the “Seinfeld Problem” came up. “It’s illegal,” he said, one fist clenched.
And it could be a giant pain in Tomra’s business if lots of people get the idea. Powers was adamant that people would follow the law, and Tomra’s audits and volume watching would catch those who flout it.
The nickel stops with them. And they will be watching.